A court may restore a GST registration if the taxpayer agrees to become compliant.

A court may restore a GST registration if the taxpayer agrees to become compliant.

Issue

Should a taxpayer whose GST registration was cancelled for non-filing of returns, and whose subsequent appeal was also rejected for being filed late, be given a final opportunity by a High Court to have their registration restored?

Facts

• A petitioner-company, due to poor financial condition, was unable to file its GST returns for the period from December 2023 to March 2024.
• As a result of this continuous non-filing, the tax department cancelled the company’s GST registration.
• The petitioner’s statutory appeal against this cancellation order was rejected by the appellate authority on the ground of delay (it was filed beyond the prescribed time limit).
• Having exhausted all its remedies under the GST Act, the petitioner filed a writ petition before the High Court, arguing they were not given a sufficient opportunity and were facing genuine hardship.

Decision

The High Court ruled in favour of the assessee, setting aside the cancellation.

• The court adopted a very pragmatic and pro-revenue approach, which ultimately benefited the taxpayer.
• It reasoned that since the petitioner was facing adversity but was now willing to get back into the mainstream tax system, it was in the best interest of the revenue department itself to allow this. Bringing the petitioner back into the formal economy would enable them to conduct business and pay regular taxes in the future.
• Based on this logic, the court set aside the impugned cancellation and appellate orders.
• It directed the tax authority to consider the case for revocation of the registration, but made this relief conditional on the petitioner first submitting all its pending GST returns.

Key Takeways

1. The Goal is Compliance, Not Punishment: The court’s decision emphasizes that the ultimate objective of the GST law is to ensure tax compliance and revenue collection, not to permanently de-register businesses for past defaults, especially when those defaults were caused by genuine financial hardship.
2. A Pragmatic and Pro-Economy View: High Courts often take a practical view in writ petitions. Instead of focusing rigidly on procedural timelines (like the delay in filing the appeal), the court here focused on a solution that was a win-win: the taxpayer gets to resume their business, and the government gets a compliant, tax-paying entity.
3. Relief is Always Conditional on Compliance: The relief granted by the court was not a free pass. The court made it very clear that the registration would only be considered for restoration after the petitioner fulfilled their primary obligation of filing all their overdue returns and paying the associated dues. This is a common “comply first, get relief later” approach.
4. Writ Jurisdiction as a Last Resort: This ruling shows that even after a taxpayer has exhausted all their statutory remedies (like appeals), they can still approach a High Court under its writ jurisdiction to seek an equitable remedy and a final opportunity to correct their past defaults.